Template:M comp disc 2002 ISDA 6(e): Difference between revisions

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Replaced content with "{{isda 6(e) comp|isdaprov}}"
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The {{1992ma}} does not define “{{isdaprov|Early Termination Amount}}” but refers to it obliquely in Section {{isdaprov|6(e)}} as:
{{isda 6(e) comp|isdaprov}}
 
:''...The amount, [[if any]], payable in respect of an {{isdaprov|Early Termination Date}} and determined pursuant to this Section ...''
 
Correctly, it is best referred to as a “Section {{isdaprov|6(e)}} Amount” under the {{1992ma}}, although of course everyone does call it the ''{{isdaprov|Early Termination Amount}}''.  This inevitability was recognised in the {{2002ma}}, where it is defined in Section {{isdaprov|6(e)}} as follows:
:''... the amount, if any, payable in respect of that {{isdaprov|Early Termination Date}}.''
 
But the {{2002ma}} also has a “{{isdaprov|Close-out Amount}}”, so you may want to know what the difference between the {{isdaprov|Early Termination Amount}} and the {{isdaprov|Close-out Amount}}, you know, ''is''. Yes?

Latest revision as of 17:02, 1 January 2024

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Discussion

The 1987 ISDA was half-cocked and shambolic, and laboured under the wishful illusion that if the other guy blew up, even if he was in the money, it was kind of okay to just flip him the bird and walk off with a windfall (in the form of not owing him the money you like, actually owed him). Not cool these days. Once folks realised this wouldn’t fly from a netting perspective they tried to fix it in the 1992 ISDA, whose close-out methodology is truly hideous.

ISDA’s crack drafting squad™ overhauled whole close-out process, soup to nuts, in the 2002 ISDA, and is now much more straightforward — as far as you could ever say that about ISDA’s crack drafting squad™’s output. But a large part of the fanbase — that part west of Cabo da Roca — sticks with the 1992 ISDA. Odd.

Differences, in very brief:

The 1992 ISDA has the infamous Market Quotation and Loss measures of value, and the perennially-ignored First Method and the more sensible Second Method means of evaluating the termination value of terminated Transactions. The 2002 ISDA has just the Close-out Amount to cover everything. So while the 1992 ISDA is far more elaborate and over-engineered, this is not to deny that the 2002 ISDA is elaborate or over-engineeered.

The 2002 ISDA has a new Section 6(e)(iv) dealing with Adjustment for Illegality or Force Majeure Event. This wasn’t needed in the 1992 ISDA, which didn’t have Force Majeure Event at all, and a less sophisticated Illegality.